“Oh, I just had the best product idea ever! Do you think I should start a business?” Since I left the corporate world, I have had countless of these conversations. Some were more serious than others. Some already had a rough business plan, others just had this business idea over a drink. But how do you really know if your idea is worth it? Let me share my key learnings from starting my own business with you. This checklist should help you assess not only if it is the right idea but also if you are ready to get started.
1. Basic Research
If you are serious about quitting your job and investing your savings into this idea, you should take calculated risks. To assess those risks, research is key.
a. Does the Product Exist Already?
Well, duh! But a lot of people make plans up in their head without verifying this basic factor. In times of Google it is easy to find out if your idea has already been executed. Just because you have not heard about it, does not mean that it does not exist. You can be sure that the majority of ideas has already been picked up on.
If your idea really has not been translated as yet, think about the reason for that. What are the barriers to doing it? Is it cost-intensive? What is the legal landscape? Even if your product or service exists already, is there a way to improve it? Or maybe it has been executed abroad but has not been brought to your local market?
b. Why now?
Why is now the right time to do it? You can have the best idea but if you are too early, it will not be successful.
c. Why me?
Why me? Why are you the right person to do it?
I am not saying you need to know everything about the product but what is your personal USP? What is your expertise? Do you have special skills? If you want to build an online portal but you are not a programmer, maybe you have industry experience? Or, do you have enough capital to hire the right from your network?
2. Does It Solve a Problem?
Be critical and assess your idea: does it really solve a problem? Or is it something which is a nice to have but probably nobody will pay for it?
3. What Is the Necessary Capital?
Make a basic financial analysis. Try to analyse every dimension of your product from a financial perspective. Get price quotations from your suppliers or potential business partners, think about shipping, legal fees and fees you would not even dream about thinking about (e.g. copyright costs for pictures). I advise to add 20-50 percent (depending on how conservative you want to be) to arrive at the capital you will need for your product. And do not stop at product development. A lot of startups forget about marketing costs which can be substantially higher than your development costs. From my experience, it is always better to calculate higher and be more conservative. Running a business is like building a house – unexpected costs pop up and it is always rather more than less of what you calculated.
4. Who Are Your Competitors?
Analyse your potential competitors. Who is your direct competition? How long have they been doing it and can you get access to their numbers?
If somebody tells me “Oh, it’s a new product, there are no competitors.”, I always say that in any market there are competitors. Direct or indirect ones. For example, I started a fitness app at a time where there were no fitness apps in China. However, my competition was fitness DVDs or gyms. Therefore, think out of the box. Knowing your competitors and their success factors or even failures will help you a lot moving forward. The analysis also helps you think about your potential marketing campaign: if your competitors are much bigger than you are it will be difficult to be visible for you.
5. How Much Capital Do You Have?
Do you have the necessary capital. And this is important: not only for product development but also in terms of living cost. Can you still pay your rent and living expenses? How long will your savings last? Similar to calculating the start-up cost, add 20-30 percent to your calculations.
6. Test the Product Need
One of my biggest learnings from starting my own business is that you always have to get customer feedback. You have to do it as early as possible. Start with your family and friends. But even more important: talk to strangers, industry experts and your target group. It can be as simple as that: I went to salons in Asia and started talking to the stranger next to me if they worked out and if they used fitness apps. The market is ruthless and the attention span of your customers will be very, very limited. You would rather test your idea when it is really small and your investment is small than finding out you went completely the wrong way when it is too late. I know it is tough to hear somebody criticize your product but for me this harsh feedback was key.
8. Stop Making Excuses
This is a scene from an investors conference I attended:
“I have this great product idea. I know it would work but I don’t have any money to set it up. And because I do not have the money, I cannot start the product. But I know that the product would work. What can I do?”, asked a young woman, who wanted to set up a simple website, to a panel of angel investors. Basically she was expecting that somebody would invest in a concept on a piece of paper.
First point to notice: If you really do not have the money to outsource it to a programmer, why haven’t you started teaching yourself how to build the site? Can you acquire those skills? I do not want to sound harsh. But I know what the reality is like. If you really cannot finance it yourself, start teaching yourself and set it up. I taught myself website development, graphic design, videography and many other things simply because our resources were limited. If you really want to do it, there is a way to do it.
Second point: The times of raising 200-500k with idea on a piece of paper are over. Maybe at the peak of the startup mania in 2014 this was possible but it has become a lot harder and you need to show proof of concept and commitment. Why would anybody invest in a business where you have neither invested your time nor your money? I certainly would not. Furthermore, think about what funding really means. Can you deal with the stress and with the high expectations? Is getting funding really the only way to be successful? (Note: this is a very big topic and I am currently working on a separate post about raising capital, so stay tuned!)
I hope this brief guide helps you get an overview of what you are planning to achieve. I am sure with the right amount of willpower and realistic planning you can do it! Let me know about your experiences. Have you started a business and want to share some advice? Or are you debating if you should quit your job and start your own thing? Get in touch with me in the comments, via DM or on my social channels, I look forward to hearing your stories and questions!